Saturday, July 09, 2005

There He Goes Again: UnitedHealth's CEO on the Pacificare Merger and the State of Health Care

UnitedHealth Group has acquired Pacificare in a $8.1 billion dollar deal, as reported here by the Los Angeles Time. United is already the second largest health care insurer/ managed care organization in the US. Even Alain Enthoven, a charter member of the Jackson Hole group, and long-time advocate of managed competition, was not enthused. "I don't see this as beneficial to California consumers or employers," he said. "I regard this as a loss and doubt there are any economies of scale to be achieved here."
United Chief Executive Officer William W. McGuire MD, on the other hand, called the merger "compelling, straightforward and powerful" and said it will advance "a national presence that can help address a highly fragmented healthcare system."
Later, the Times reported McGuire justified the merger by saying, "There is not enough money … to pay for the healthcare system as it operates today. It is indiscriminate, it is non-scientifically based, it is founded on anecdote as much as it is science. We have to change course."
I actually agree with him here. But the Times also noted that the deal will result in Phanstiel profiting to the tune of about $190 million from transactions involving stock options, restricted stock shares, and other equities. And we earlier posted that McGuire's total compensation was reported to be over $124 million (here). So claims that this merger was motivated by a desire to cut the total costs of health care ring a little hollow. Maybe there would be a little more money to pay for actually providing health care if the CEO's of managed care organizations (and other big health care organizations) were not making such immense amounts.
I agree with McGuire that much of health care is "indiscriminate," "non-scientifically based," and "founded on anecdote." But what has United, the second largest health insurer in the country, done to remedy these problems. How much does United spend on scientific research? Or on teaching physicians evidence-based medicine?
We may often criticize the pharmaceutical industry, but at least they actually pay billions for research, some of which is of good quality, and some of which leads to products that actually improve health.

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